Who Will Fix Labor Woes, First-Class Mail, Declining Market Share?

The postal issues of the moment are the resignation of Postmaster General Marvin Runyon, the state of health of the postal service and qualities the board of governors may look for in the next postmaster general.

What has changed with Runyon at the helm? He has:

* Made USPS operate more like a business.

* Put the postal service on solid financial footing.

* Brought in more than $1 billion in profits in three years. In all likelihood, negative equity on the balance sheet will be eliminated by the end of fiscal year 1998, even without higher postage rates.

* Stressed the importance of meeting delivery service standards for First-Class mail.

* Brought in a number of key senior managers from private industry.

* Publicly raised the need for postal reform in such a way that there may well be legislation voted on by the House Government Reform and Oversight Committee.

But as with any large organization, Runyon will leave some significant problems for his successor.

Relations between management and labor continue to be strained with unresolved worker grievances at an all-time high. In this volatile environment, labor-contract negotiations with the major postal unions will begin later this year. Compounding this difficulty is the retirement of Joe Mahon, vice president of Labor Relations. He has been involved in the last few contracts negotiations, which have resulted in arbitrator rulings generally favorable to the postal service. Mahon is being replaced by a highly respected operations manager, but one without significant collective bargaining experience.

Runyon has spoken of the postal service's loss of market share in financial transaction mail that has moved to other, primarily electronic, media. First-Class mail volume has been growing, but at a decreasing rate.

But recent USPS volume statistics look ominous. In the most recent quarter, First-Class mail dropped to less than 50 percent of all mail, and single-piece First-Class mail, the largest revenue category, declined 1.5 percent. The next postmaster general must do something to reverse this trend.

Closely tied to the issue of softening mail volume is the timing of the next postal rate increase, which is before the Postal Rate Commission. The commission will issue its recommendation for new rates in April.

However, the board of governors of the postal service has total control over the timing of the rate increase. Legally, new higher rates could be in place by May. Many industry observers say higher rates aren't needed in 1998.

The real questions the governors must answer are:

* Does USPS need the money?

* How much more will higher rates further erode First-Class mail volume and slow the growth of advertising mail?

Some mailers are aware that serious questions have been raised regarding the efficacy of the postal service's First-Class delivery measurement system. Apparently, in at least one location, local postal officials were able to give "special delivery" to those pieces being measured.

In addition, we know that First-Class delivery service has not been meeting the standard in two- and three-day service areas. More important to those concerned with the consistent and timely delivery of advertising mail, the postal service last year canceled the EX3C system that reported on ad mail delivery service. And many catalog mailers know that last fall's delivery fell below the service levels of the prior year.

So while the postal service is on sound financial footing, the next postmaster general will face a number of significant problems

The opinion of the new postmaster general should hold significant weight with the board of governors (the postmaster general is automatically a member). Unfortunately, he or she will not have much time to get up to speed on these complex issues. And a good guess is that another CEO like Runyon is not likely to be available for about $150,000 a year without millions in bonuses or stock options.

The board of governors should take a hard look at the senior management team at the postal service because the best candidate may be in its own back yard.

Cary H. Baer, former vice president of delivery services for Reader's Digest, is a direct marketing consultant and chairman of the Advertising Mail Marketing Association.